Three minute quick view of cross chain transaction agreement chainflip

Hainflip labs is a decentralized and trustless protocol based on substrate. The protocol can realize automatic cross chain exchange between different blockchains through the automatic market maker (AMM) model without user authentication.

Like CEX, chainflip connects chains by deploying wallets on each chain. The difference between the implementation of chainin and that of non centralized database is that it is widely accepted by chainin.

Users do not need to back up the key file, download a new browser wallet or install some special software. They only need the network, browser and target address. By sending a token and providing a compatible address, they can cross chain swap without trust. At any stage of swap, the native token (flip) is not required, because the network fee paid with flip will be automatically deducted from the exchange and will be burned through the liquidity pool.

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Chainflip labs has the advantages of fast swap speed, easy to use and strong cross chain scalability. Its ultimate goal is to realize automatic exchange for all major blockchains and provide users with an easy-to-use, reliable, secure and license free method to completely avoid managed exchange. They believe that attributes and indicators such as generalized cross chain capability, decentralization and product availability are very important to achieve this goal.

It should be noted that the security model of the project focuses on punishing malicious acts, and there are still security risks caused by loopholes or errors in smart contracts and restructuring in the support chain.

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Since chainflip labs runs in its own independent execution environment, most exchange execution can be automatically executed by the verifier network without complex user interaction. In the future, the project should make the most of this, and new functions should be designed to take advantage of this to bring benefits to users.


working principle


Uniswap, curve and other existing liquidity pool platforms rely on Ethereum smart contracts to ensure security, so that users can send funds to and from these platforms without trust. As a cross chain, chainflip cannot rely on the security of a single smart contract to produce the expected results. On the contrary, chainflip relies on a vault system, which can protect the funds of platform users without trust. Each supported blockchain has a vault operated by the verifier, which is a special type of server. The jointly managed cryptocurrency wallet is controlled by the pile node called the verifier.

In order to create these vaults, the verifier participates in a setup process, in which the new node is definitely selected to serve the next active vaults. These nodes jointly build a threshold signature wallet, from which transactions can be sent only when the transaction is signed by a given verifier's threshold. The scheme used to generate the vault does not need trusted dealers or disclosure keys when signing transactions, and is put into the network to obtain rewards. Verifiers and their vaults enable chainflip to store funds in a secure and untrusted manner, but unlike smart contract codes, it does not give a clear set of rules on how funds should be handled in the vaults.

In order to achieve this, the design of chainflip includes a state chain based on Polkadot's substrate framework as the coordination mechanism of chainflip. It contains all the data related to the contents of the vault and the rule set of how to deal with transactions after entering the vault. It is through the state chain that the verifier reaches a consensus on the status, liquidity and when and where to send out the transactions of all swaps. Using the rules of the state chain and the trustless nature of the vault, users can use chainflip to exchange assets across the chain in a trustless way, so as to meet the three main objectives of chainflip.

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Chainflip is not very different from other interoperability solution providers such as thorchain or qredo, its closest competitors. The technology used in its design and the function of the protocol may have the following subtle differences:

  • Chainflip has nothing to do with the wallet.
  • Chainflip relies on a larger number of verifiers (initially 150).
  • Chainflip does not require the native chain to implement any complex protocols or other changes, including infrastructure.
  • It uses ed25519 signature algorithm to realize its threshold signature (excluding bitcoin, Wright coin and other networks).
  • Chainflip does not rely on its online tokens to pair assets, but on the widely adopted stable currency (usdc).
  • Chainflip can be used without any additional software, special wallets, pre deposits, hook / pack tokens, synthetic assets and user collateral requirements.


Token economy


Chainflip's network token flip is based on Ethereum's erc-20 standard. The token design of flip is similar to the implementation of Ethereum eip-1559 and follows the inflation (token issuance) and deflation (token combustion) models. Therefore, the supply of flip token will not be limited (the initial supply of flip token is $90 million), and the project may change its token model in the future.


Treasury mortgage and incentive


Token Staking

The verifier operator will flip token stacking in exchange for block rewards. All nodes get the same reward, regardless of the size of their bets. The overall security of the network depends on its collateral, which in turn depends on the block reward yield (apy / APR). A fundamental change in chainflip's betting mechanism is that it does not allow delegation. The proposed verifier award is:

  • Sandstorm launch – 5%
  • Ibiza release – 6% 
  • Berghain release – 7% 


punishment

The punishment is also to prevent the malicious behavior of the verifier. Theoretically, if most of the shares of flip are lower than the value of the assets in their respective vaults, the punishment may not effectively prevent malicious behavior. In fact, if the assets locked in the vault are slightly higher than the value (or collateral) pledged by most nodes, any malicious actor will be indifferent to the attack decision. However, if the gap is large enough to provide an acceptable or attractive level of return over the bet, the verifier will be technically motivated to attack. Therefore, this indicator (lock-in value and mortgage value in the Treasury, or simply mortgage rate) is an important indicator for chainflip liquidity providers to rationalize the risks they bear. Of course, there will be an upper limit on liquidity, or it is directly related to the mortgage level of the network. In this case, the growth of the network will come from the high-frequency exchange reflected by the flip token price.


Token burning


The exchange fee charged on chainflip AMM is used to purchase flip token from usdc / Flip pool, and the exchange fee will be charged in usdc. These flip tokens will be automatically burned and deleted from the total supply.


Liquidity guidance

Chainflip does not guide mobility by using typical yield farming mechanisms. Instead, liquidity providers will award flip dollars (from the reward pool) based on the liquidity supply fees they earn on the agreement (rather than just providing liquidity). This incentive mechanism will eventually be reduced.


Token effect


  • Pledge and run the verification node
  • Encourage liquidity providers


Team Introduction


Chainflip is a team of more than 25 experienced professionals from Australia and Europe. The team's experience covers software and web development, software engineering, Devops, blockchain (smart contracts, dapps), research and communication, and law. The team is also growing and recruiting talents with different skill levels. The company has offices in Berlin, Budapest and Melbourne. The following is the introduction of the main members of the team.


Simon Harman


Simon Harman, the founder and CEO of chainflip labs, is an advocate of data privacy and co authored white papers on Loki (later renamed oxen) and session app (more than 1 million installed on Google playstore). He graduated from RMIT University in September 2017, majoring in music. Six months after graduation, he served as events facilitator in blockchain centre. Chainflip labs is not Harman's first encryption project. Previously, he founded and continued to serve as a member of the board of directors of oxen. Later, he began to focus on chainflip labs in 2020. Today, the company has about 25 employees. Currently, he is also the CEO of oxen and chainflip labs.


Tom Nash


Tom Nash, CTO, is also the co-founder and CTO of flex dapps. Previously, Tom briefly served as a blockchain consultant for typehuman and a blockchain developer for wetrustplatform. Tom graduated from Lancaster University with a bachelor's degree in computer software engineering.


Chris McCabe


Chris McCabe is the co-founder of the project and the chief operating officer of oxen and session app. From 2016 to 2018, he served as blockchain educator and consultant.


Alastair Holmes


Alastair Holmes works as a protocol research engineer in chainflip. He has extensive experience in software development using C + +, cmake, python, DirectX, Vulkan, VBA and rust. He received a master's degree in computer science from Cambridge University.


Investment institutions


Chainflip labs raised $6 million in the first round. Recently, the project reached a private equity investment transaction of $10 million with three senior encryption venture capital companies framework ventures, blockchain capital and Pantera capital. At present, the total financing is US $16 million. It is reported that the funds raised will be used to build cross chain DEX. The team plans to launch the first version of DEX later this year.


reference material
Chainflip labs documentation: https://docs.chainflip.io/concepts/
Whitepaper:  https://Chainflip Labs. io/whitepaper. pdf
Website:  https://Chainflip Labs. io/
Blog:  https://blog.Chainflip Labs. io/
Twitter:  https://twitter.com/Chainflip Labs
DCoreOfficial: https://platform.d-core.net/asset-review-summary-chainflip/